CHAPTER 2: FACTORS AFFECTING

ENTREPRENEURIAL GROWTH AND MAJOR

MOTIVES INFLUENCING ENTREPRENEURS

1. INTRODUCTION

1.1 What is entrepreneurship?

➢ Entrepreneurship is the creation or extraction of economic value. With this

definition, entrepreneurship is viewed as change, generally entailing risk
beyond what is normally encountered in starting a business, which may
include other values than simply economic ones.
➢ Or if we simply put it, entrepreneurship is the creation, management and
assumption of the risks related to a business venture. The person who does
this type of business venture is termed as an entrepreneur.

1.2. What is a risk?

➢ Risk is any situation that would expose or lead o a danger or a dangerous

situation. From our perspective, entrepreneurship, risks refer to financial risks,
market-based risk and customer-based risks and much more.

1.3. Types of Entrepreneurships:

➢ Entrepreneurship is a dynamic and multifaceted field that encompasses a

wide range of activities and business endeavors. Therefore, the types of
entrepreneurships exist because of the diversity present in this field.

A few types are:

1.3.1. Small Business:

➢ Small business entrepreneurship is the most common form of

entrepreneurship. Entrepreneurs in this category establish and operate small
businesses, such as local retail stores, restaurants, consulting firms, or
freelancers.
➢ Their primary focus is on providing goods or services to a specific local or
niche market.

1.3.2. Corporate Entrepreneurship (Intrapreneurship):

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 ➢ Intrapreneurs are individuals within large corporations who exhibit
entrepreneurial behavior by driving innovation and introducing new products
or processes.
➢ They often work in cross-functional teams and enjoy some autonomy while
leveraging the resources and infrastructure of their parent company.

1.3.3. Social Entrepreneurship:

➢ Aims to address social or environmental issues while generating revenue.

Prioritizes social impact and sustainable solutions over profit.

2. FACTORS AFFECTING ENTREPRENEURSHIP

➢ Entrepreneurship plays a crucial role in economic development, job creation,

and innovation. However, the success of entrepreneurial ventures is
influenced by a wide range of internal and external factors.

➢ There are three types of factors affecting entrepreneurship namely:

2.1 Economical factors.

2.2 Psychological factors.

2.3 Social factors.

2.1. Economic Factors:

2.1.1. Capital:

➢ To start your entrepreneurial journey, you would need capital for many
reasons.

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 ➢ First off, you would need land, a place where you can start your company.
You would need raw materials to create the product or service. You would also
need machines to process those raw materials. If you have funds readily
available to use as capital that would be a bonus for you. Therefore,
considered as a lubricant for entrepreneurship.

2.1.2. Labour:

➢ For a business to see growth and success, you will require skilled labour.
➢ However, the availability of quality labour at an efficient cost would be a
bonus.

2.1.3 Raw Material:

➢ Just as important as labour is raw material procurement.

➢ When choosing the location for your business make sure it is near the raw
material source.
➢ To gain maximum profit at a low cost, a location close to the raw material
source is the ideal choice.

2.1.4 Market:

➢ The market plays an important role in ensuring the growth of your business.
➢ The size of the market, as well as the marketing techniques used, are both
important. A market is a place where entrepreneurs and consumers interact.
➢ It is a place were buying and selling take place.
➢ With the advanced technology available today, the world has become one big
market. You can market your product to any part of the world using the
internet and shipping facilities.
➢ This improves your chances of increasing profit and sales.

2.1.5. Infrastructure:

➢ The infrastructure available in your city, village or town will go a long way in
having an impact on the growth of your entrepreneurial venture.
➢ A location with quick and easy access to communication tools and the latest
technology will help boost your business or company.

2.2 Psychological factors:

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2.2.1. Need achievement theory:

➢ To the best of our knowledge, the best known of primarily psychological

theories is David McClelland’s (1961) ‘Theory of need achievement’.
➢ According to McClelland, a constellation of personality characteristics which
are indicative of high need achievement is the major determinant of
entrepreneurship development.
➢ If the average level of need achievement in a society is relatively high, one
would expect a relatively high amount of entrepreneurship development in
that society.

2.2.2. Withdrawal of Status Respect:

➢ When members of a given social group perceive that they are not respected
by the dominant group of society, this triggers a personality change that
encourages entrepreneurial behavior.
➢ Hagen (1968) attributed the withdrawal of status respect of a group to the
genesis of entrepreneurship. Giving a brief sketch of history of Japan, he
concludes that she developed sooner than any non-western society except
➢ Russia due to two historical differences. First, Japan had been free from
‘colonial disruption’ and secondly, the repeated long continued withdrawal of
expected status from important groups (Samurai) in her society drove them to
retreatism which caused them to emerge alienated from traditional values with
increased creativity. This very fact led them to technological progress through
entrepreneurial roles. Hagen (1962) believes that the initial condition leading
to eventual entrepreneurial behavior is the loss of status by a group.

2.2.3. Motives:

➢ Motives in entrepreneurship refer to the underlying reasons or motivations

that drive individuals to start, operate, or pursue business ventures.

➢ These motives represent the core desires, goals, or objectives that lead
someone to become an entrepreneur.
➢ Motives in entrepreneurship are the fundamental drivers that lead individuals
to become entrepreneurs and shape their goals and aspirations within the
entrepreneurial context.

2.2.4. Willingness to take risks:

➢ Willingness to take risks is a crucial characteristic in entrepreneurship.

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 ➢ Risk-taking is the disposition to make decisions and undertake actions that
involve uncertainty, potential losses, or adverse outcomes in the pursuit of
business opportunities and goals.

2.3. Social Factors:

2.3.1. Government Actions:

➢ The social contract between the government and citizens can have significant
effects on entrepreneurship.
➢ Government policies related to taxation, regulation, and support for small
businesses can encourage or discourage entrepreneurial endeavors.

2.3.2. Social Responsibility:

➢ Entrepreneurs are an important part of the social system. The
interdependence of society and business is increasing, with sing standards of
living in society.
➢ It can improve the financial stability of the entire society. It involves going
beyond profit generation to actively contribute to the betterment of society and
the environment

2.3.3. Religion and Caste Factor:

➢ Certain caste systems encourage entrepreneurship. Religious communities

like Parsees, and Marwaris etc. seem to have an affinity for entrepreneurial
activities.
➢ The religious beliefs and values of individuals can influence their business
decisions and ethical considerations.
➢ For instance, some religions may emphasize honesty, fairness, and social
responsibility, which can impact business practices.
➢ In societies where caste systems are prevalent, individuals from certain
castes may have access to resources, education, and opportunities for
entrepreneurship.
➢ Lower-caste individuals may face significant barriers.

2.3.4. Education:

➢ Education is the best means of developing from knowledge learning to skill

improvement, entrepreneurship education, provides entrepreneurs with
cognitive skills to better evaluate and exploit entrepreneurial opportunities,
increase the level of self-confidence, and reduce perceived risk.

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 ➢ The quality of education and training related to entrepreneurship can affect
the number and success of entrepreneurs.
➢ Access to entrepreneurship education and mentorship programs can provide
valuable skills and knowledge.

2. Entrepreneurial Motive:

➢ Entrepreneurial motives are the distinct reasons that propel individuals to

initiate and manage their own enterprises. These incentives, which prompt
people to embark on entrepreneurial endeavors, encompass a diverse range
of factors shaped by personal, financial, and environmental considerations.

2.1. Importance of Passion:

➢ Passion remains a cornerstone in entrepreneurship, it's vital to acknowledge

that success is not solely dependent on passion. Strategic planning and
comprehensive market research play equally critical roles in the
entrepreneurial landscape. Crafting a well-thought-out business strategy and
understanding market dynamics are vital components that complement and
enhance the impact of this fervor.
➢ This driving force, though not the exclusive determinant of success,
intertwines with factors like determination, motivation, innovation, creativity,
customer engagement, and adaptability, forming a dynamic foundation. This
synergy enables entrepreneurs to navigate the challenges and fluctuations
inherent in business, making passion a resilient and sustaining force
throughout the entrepreneurial journey.

2.2. Feeling of accomplishment:

➢ Accomplishment is satisfaction that stems from successfully completing tasks,

providing a sense of fulfillment.
➢ In entrepreneurship, this sense of achievement is a vital and rewarding
element, fostering motivation and drive.
➢ Entrepreneurs frequently experience this emotional reward when they reach
significant milestones or successfully navigate and overcome challenges in
the dynamic business environment.

2.3. Personal growth:

➢ It Involves tackling diverse challenges, fostering adaptability, and refining

problem-solving skills.

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 ➢ Encourages innovative thinking, pushing individuals to find unique solutions
and nurture creative approaches.
➢ Entrepreneurs naturally evolve into leaders, assuming responsibilities and
making crucial decisions that contribute significantly to personal growth. 
➢ The amalgamation of challenge-handling, creativity, leadership, and
continuous learning forms a holistic journey fostering individual development.

2.4. Sense of control:

➢ This refers to a psychological and emotional state wherein individuals feel

empowered to influence their destinies and effectively navigate their
environments.
➢ It encompasses the belief that one possesses the power to shape the
outcomes of their actions.

Locus of Control:

➢ It is a psychological concept that explores the perception of control

individuals have over their actions compared to external forces shaping
life events.
➢ It delves into the internal or external attribution of control, shedding
light on how people interpret the causes of their experiences.

Internal Locus of Control:

➢ This concept signifies that individuals perceive control as stemming

from their own efforts and decisions.
➢ A higher internal locus of control is associated with personality traits
such as self-control and self-efficacy, suggesting a belief in one's ability
to influence outcomes through personal actions.

External Locus of Control:

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 ➢ In contrast, an external locus of control means attributing power to
external forces, circumstances, or chance.
➢ Individuals with an external locus of control believe that outcomes are
determined by factors beyond their control, diminishing the perceived
influence of their own actions.

2.5. The need for achievement:

⮚ The need for achievement means the motivation to do well, strive to attain
excellency, face challenges and obstacles to achieve the goal.
⮚ People with low need for achievement or unwilling to take chances to test
their skills and abilities and they seem to be more motivated by fear of failure
rather than by hope and expectation of success.
⮚ Entrepreneurs realize that they should engage in activities or tasks where
they must share a high degree of individual responsibility for outcomes.
Hence, they need individual skill and effort to design plans that have
moderate or less than moderate risk.

2.6. Motivation to levels of commitment in social changes:

➢ It refers to what motivates people to get involved in improving society and how
dedicated they are to making a positive impact.
➢ It explores the reasons behind their commitment to social causes and the
different levels of effort they put into bringing about positive changes in their
communities or the world.
➢ They use their creative ideas to make positive changes in society. They help
build things like schools, hospitals and training programs for businesses.

2.7. The need for affiliation:

➢ It is a need for open and sociable interpersonal relationships. In other words,

it is a desire for a relationship based on co-operation and mutual
understanding. Achievement is directly related to high performance.
Individuals who are better and above average performers are highly
motivated.
➢ High need for affiliation has mostly been associated with individuals whose
desire in life is to establish, maintain or renew affective relationships with
others.
➢ They potentially tend to be good workers.
➢ As an entrepreneur, the need for affiliation to a certain extent may contribute
to the drive for maintaining effective business networking.

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2.8. To have a better quality lifestyle:

➢ While their journey may start with gradual progress, Entrepreneurs are known
for their ability to generate fresh and inventive ideas that contribute to
society's betterment.
➢ Their dedication and experience enabled them to achieve remarkable
success, ultimately leading to an improved quality of life for themselves and
often for others in their community.

2.9. The need for power:

➢ It is all about the motivation to control, influence, and make a difference in the
lives of others and in various situations.
➢ Entrepreneurs aim to enhance their power by making straightforward
decisions related to discipline for clarity, offering support to influence, being
creative to make an impact, seeking self-understanding and insight to boost
energy, and aligning with their values to build confidence.
➢ These simple choices help entrepreneurs strengthen their ability to shape
their ventures and the world around them.

2.10. The need to make money:

➢ It is the strong urge to improve one's financial situation through hard work,
wise investments, or financial growth opportunities.
➢ Entrepreneurship benefits not only the individuals but also society by creating
jobs, and entrepreneurs contribute to a strong economy by paying taxes and
participating in the supply and demand chain.

2.11. Flexibility:

➢ Successful entrepreneurs acknowledge the perpetual changes in the world

and their business environment.
➢ They prioritize their end goals but are open to adapting their strategies and
products to match the evolving market conditions. 
➢ The focus is on maintaining flexibility without compromising the strength of
their vision.
➢ They possess the ability to navigate through varying circumstances without
being overwhelmed.

2.12. Legacy:

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 ➢ Entrepreneurial legacy encapsulates the story of previous entrepreneurial
successes or perseverance.
➢ Legacy represents the lasting influence of one's life's work, serving as a
catalyst for positive change that surpasses one's lifetime and contributes to a
better world.
➢ Entrepreneurs can leave their mark through technological advancements,
reorganization of businesses, or early investments in industries.
➢ However, those who truly revolutionize the landscape are often the ones who
introduce entirely new ways of thinking.
➢ Elon Musk's legacy through SpaceX serves as an example of pushing the
limits of human exploration, fostering technological innovation, and igniting the
aspirations of a new generation of dreamers.

2.13. Job Satisfaction:

➢ Entrepreneurs frequently encounter job satisfaction as they operate without

a boss.
➢ They possess the independence to make decisions and mold their work in
alignment with their personal vision, leading to an amplified sense of
fulfillment and contentment in their work
➢ Job satisfaction involves the positive and gratifying sentiment derived from
one's job or work environment. 
➢ It differs among workers and is determined by the degree of enjoyment
derived from the job and its impact on their overall well-being.

2.14. Religious Convection:

➢ Religion can hold significance for entrepreneurs, depending on their customer

base, investors, and societal context.
➢ Entrepreneurial decisions can be strongly influenced by religious beliefs,
leading to the establishment of businesses aimed at fostering positive impacts
within communities.
➢ An example is Muhammad Yunus, the founder of Grameen Bank, who
provided small loans to the underprivileged, aiding them in starting
businesses and improving their lives.
➢ While not explicitly religious, his work mirrored the idea of kindness and
assistance, integral to various religions, including Islam, the predominant
religion in his home country, Bangladesh.

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2.15. Competence:

➢ Entrepreneurial competencies encompass fundamental attributes, including

both generic and specialized knowledge, motives, traits, self-perceptions,
social roles, and skills.
➢ These competencies ultimately contribute to the initiation, continuity, and
potential expansion of a venture.
➢ While certain competencies are inherent, others are developed through the
learning process and through training and development initiatives.

3. FACTORS MOTIVATING THE ENTREPRENEURS

➢ Entrepreneurial motivation is what drives people to start and run businesses.

It can be categorized as intrinsic (internal) and extrinsic (external) motivation.
➢ Intrinsic Motivation is about personal fulfillment, passion, creativity, and a
sense of purpose in entrepreneurship.
➢ Extrinsic Motivation is driven by external factors like financial rewards,
recognition, and market opportunities. Successful entrepreneurs often have a
mix of both intrinsic and extrinsic motivations.

3.1. INTERNAL FACTORS

3.1.1. To Be Independent:

➢ Entrepreneurs are driven by the desire for independence, seeking autonomy,

and the freedom to make their own decisions. This internal motivation allows
them to escape traditional employment constraints, align their work with

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 personal values, and create their own destiny while potentially achieving
financial security and leaving a lasting legacy.

3.1.2. Be Recognized for One’s Contribution:

➢ Entrepreneurs are motivated by the desire for recognition, which fuels their
sense of fulfillment and drives them to excel in their ventures, making a lasting
impact.
3.1.3. Desire to do something new:

➢ The desire for innovation fuels entrepreneurs, driving them to create and
explore new ideas, ultimately leading to business success and personal
fulfillment. Netflix and Uber are prime examples of companies that
revolutionized their respective industries with fresh ideas. Netflix introduced
streaming video over the internet, while Uber popularized on-demand
ridesharing via a smartphone app.

3.1.4. Educational Background:

➢ An entrepreneur's education provides them with essential knowledge and

skills, boosting confidence and competence to tackle challenges and seize
opportunities in their journey.

3.1.5. Occupational Background:

➢ An individual's prior work experience and expertise in a specific industry can

be a strong internal motivator for entrepreneurship. This background equips
them with the knowledge and skills to identify opportunities and succeed in a
particular business sector, driving their entrepreneurial efforts.
➢ For example, NR Narayana Murthy's background in software programming
and experience at Patni Computer Systems motivated him to co-found
Infosys, a leading IT services company.

3.2 EXTERNAL FACTORS

3.2.1. Government Support:

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 ➢ Government support, including grants, tax incentives, and regulatory
simplifications, can be a significant external motivator for entrepreneurs.
➢ For instance, the Kerala Startup Mission in India provides financial incentives,
mentoring, and infrastructure, motivating numerous entrepreneurs to drive
innovation and grow the startup ecosystem.

3.2.2. Encouragement from Big Business houses:

➢ Support from established businesses can motivate entrepreneurs through

mentorship, funding, and resource access, fostering a collaborative
environment that boosts success. For example, Tesla's open patent policy
encourages innovation and industry growth, serving as an inspiration for
entrepreneurs.

3.2.3. Availability of Financial Assistance:

➢ Access to financial assistance, like loans and investments, can motivate

entrepreneurs by removing financial barriers and providing resources for
business growth.
➢ For instance, India's Pradhan Mantri Mudra Yojana offers affordable credit to
micro and small enterprises, inspiring entrepreneurs to expand and develop
their businesses.

CONCLUSION

Whether it's a growing startup or an established company, maintaining motivation is

a critical quality for its founder. Without it, the consequences can be dire: missed
deadlines, a drop in employee enthusiasm, and ultimately, a hit to revenue and
growth. Entrepreneurs must remember that even in the face of failure, rediscovering
motivation is the path to success. Although it may not occur overnight, the key is to
free oneself from the situation, collaborate with team members to identify solutions,
and embark on a fresh start.

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